Do These 3 Checks Before Buying Uponor Oyj (HEL:UPONOR) For Its Upcoming Dividend
It looks like Uponor Oyj (HEL:UPONOR) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Uponor Oyj's shares before the 20th of March in order to receive the dividend, which the company will pay on the 28th of March.
The company's next dividend payment will be €0.34 per share, on the back of last year when the company paid a total of €0.69 to shareholders. Calculating the last year's worth of payments shows that Uponor Oyj has a trailing yield of 4.0% on the current share price of €17.1. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Uponor Oyj
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Uponor Oyj paid out more than half (57%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Uponor Oyj paid out more free cash flow than it generated - 128%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
While Uponor Oyj's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Uponor Oyj to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Uponor Oyj, with earnings per share up 7.9% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Uponor Oyj has delivered 6.1% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Has Uponor Oyj got what it takes to maintain its dividend payments? Uponor Oyj is paying out a reasonable percentage of its income and an uncomfortably high 128% of its cash flow as dividends. At least earnings per share have been growing steadily. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Uponor Oyj.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Uponor Oyj. Every company has risks, and we've spotted 1 warning sign for Uponor Oyj you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Uponor Oyj engages in the provision of plumbing, indoor climate, and infrastructure solutions in Europe and North America.
Flawless balance sheet, good value and pays a dividend.